Creating a Guaranteed Income with a Life Annuity

By Ivon T Hughes
creating a guaranteed income with a life annuity
Figure 1. Creating a Guaranteed Income

What is one primary benefit of purchasing an annuity?

One of the primary benefits of purchasing an annuity is that you are essentially creating a guaranteed stream of income, creating a pension of sorts, that can supplement your other government and/or employer pension payments.

What is a Pension Annuity?

A pension annuity is actually just another way of referring to a life annuity. The way it works is fairly simple: you deposit a lump sum of money with the insurance company offering the annuity contract. In exchange, the insurance company agrees to pay you a guaranteed income.

How Long Will Annuity Payments Last?

You can choose to request annuity income payments for the rest of your life. Payments can also be structured so your spouse or partner will receive a guaranteed income for his or her life, if you die first. If you choose to go this route, the amount you receive each month may be reduced to reflect the potential risk to the insurance company that you or your spouse or partner will surpass actuarial expectations.

Alternatively, you can request that payments be made for a specific, guaranteed time period. If you die before reaching the end of the payout period, your spouse, partner or other beneficiaries can continue receiving those guaranteed payments.

How Much Income Will a Pension Annuity Pay?

The amount you will receive from your life annuity will depend on a number of factors, including:

The amount of the lump sum deposit you made with the insurance company

  • Your age
  • Your sex
  • The length of the guaranteed period
  • The benefits of pooling motrality risks.

What Funds Can Be Used to Buy a Pension Annuity?

Some people choose to buy annuities using accumulated savings. However, you may also use registered funds to purchase an annuity, including RRIFs, RRSPs, LIRAs, etc.

To learn more about pension annuities, contact us today.

Ivon T Hughes
Ivon T Hughes

About the Author

Ivon T. Hughes

Ivon T Hughes is a leading expert in life annuities in Canada. His website LifeAnnuities.com is a recognized authority on annuities. He's also an established insurance and investment broker, through The Hughes Trustco Group since 1972. Recently, he's been redefining how annuities are sold in Canada.

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